Unit Three: Thinking Liberally - Diversity and Hegemony in IPE. Dr. Russell Williams

Transcription

1 Unit Three: Thinking Liberally - Diversity and Hegemony in IPE Dr. Russell Williams

2 Required Reading: Cohn, Ch. 4. Class Discussion Reading: Outline: Eric Helleiner, Economic Liberalism and Its Critics: The Past as Prologue?, Review of International Political Economy, 10-4 (November 2003), pp Introduction basics of Liberal Political Economy 2. Normative Liberal Approaches 3. Analytical Liberal Approaches 4. Conclusions 5. Further Reading

3 1) Introduction Basics of Liberal Political Economy: Most popular approach in IPE Ideological basis for: Most international institutions Most states international economic policies The Washington Consensus Supported by: Leading states MNCs Most academics However, is it a single school of thought? Diverse and complex = may encompass too wide a body of thought to be a single school Often defined by its opposition to realism Residual and discursive

4 The Liberal Paradigm : 1) Methodological Individualism 2) Political pluralism 3) Markets preferred to states E.g. Purpose of cooperation = achieve most efficient use of world s resources 4) Optimistic about potential for international cooperation E.g. Focus on absolute gains, not relative gains Absolute benefits of cooperation seen as large 5) International politics separable from international economics (?) Two kinds of liberal approaches: Normative Analytical

5 2) Normative Liberal Approaches: a) Classical Liberalism or Orthodox Liberalism : (Locke, Smith, Ricardo and early economics) Free markets more efficient E.g. Smith s invisible hand - Linked production more efficiently to consumption through voluntary exchange Three key principles: 1) Accumulation of profit leads to overall economic growth States job = create conditions for profit

6 2) Labor theory of value: Price of goods directly proportional to the value of labor in production 3) Comparative advantage invisible hand of free trade Different then normal Absolute Advantage and specialization If each country produced what they were most efficient at, Regardless of whether they were the most efficient producer over-all, total production would be higher = Absolute gains

7 Without trade: Wine Cloth Portugal (18)/2=9 (12)/4=3 England (15)/5=3 (15)/5=3 Total = 12 Wine 6 Cloth

8 With trade & specialization: Wine Cloth Portugal (30)/2=15 (0)/4=0 England (0)/5=0 (30)/5=6 Total = 15 Wine (+3) 6 Cloth Total output higher = absolute gains

9 2) Labor theory of value: Price of goods directly proportional to the value of labor in production 3) Comparative advantage invisible hand of free trade Different then normal Absolute Advantage and specialization If each country produced what they were most efficient at, Regardless of whether they were the most efficient producer over-all, total production would be higher = Absolute gains Powerful proof of benefits of free trade

10 2) Normative Liberal Approaches: b) Marginalism and Neo-classical economics: Liberal economics develops as a science Marginalism: Value of goods determined by price... Not labour = Neoclassical Economics: Combined arguments supportive of free market, with a mathematically/scientifically inclined school of economics. Assumed: 1) Markets were perfectly competitive 2) Markets moved towards equilibrium Theoretically suggested little role for the state in managing the economy

11 2) Normative Liberal Approaches: b) Marginalism and Neo-classical economics: Liberal economics develops as a science Marginalism: Value of goods determined by price... Not labour = Neoclassical Economics: Combined arguments supportive of free market, with a mathematically/scientifically inclined school of economics. Assumed: 1) Markets were perfectly competitive 2) Markets moved towards equilibrium Theoretically suggested little role for the state in managing the economy E.g. A natural and efficient division of labour will develop = Only irrational governments would ignore the benefits of specialization

12 c) Embedded Liberalism and Keynesianism: a.k.a. Interventionist liberalism Saw benefits of free markets, but argued markets had to be embedded in social and political realities Sources: State desire for autonomy Growing popularity of Keynesian economics

13 c) Embedded Liberalism and Keynesianism: a.k.a. Interventionist liberalism Saw benefits of free markets, but argued markets had to be embedded in social and political realities Sources: State desire for autonomy Growing popularity of Keynesian economics Keynesianism : Argued there was a need for macroeconomic state intervention in the economy States should manipulate monetary and fiscal policies to: 1) Increase demand during recession 2) Decrease demand during overheated economic growth

14 Keynesianism.... Keynes s ideas often called: Counter-cyclical demand management Macroeconomic stabilization Justified the growth of social/welfare policies and was basis of Post War class compromise Key point: Post War economic cooperation designed to make Keynesian policies possible Reduce domestic radicalism Reduce international conflict Ensure states would continue to support free trade Result Liberal free trade was embedded

15 d) Neoliberalism : Return to the neo-classical economics and a rejection of Keynesianism Beliefs: 1) Individual freedom goal of society 2) Self regulating market still most efficient 3) Where market failures occur, state unlikely to improve on the situation 4) Profits the basis of economic growth 5) Size of the state should be reduced = Increase the scope of the market in allocating resources in society Neo-Liberals see the state as playing only a residual or supplementary role: E.g. National Defense

16 3) Analytical Liberal Approaches: Much liberal analyses in IR focused on: Problem of interstate cooperation Challenge of Realism Major groups of liberal arguments: 1) Institutionalist approaches: Focus on problems of interstate cooperation and international institutions 2) Interdependence approaches: More clearly liberal - focus on domestic politics, interests, and institutions E.g. More interest in non state actors Both have evolved as explanations for why there is more economic cooperation then realists assume

17 a) Liberal Institutionalism: E.g. Robert Keohane = Neo-liberal institutionalism Attempted to subsume neo-realism - argued: 1) States motivated by: Anarchy and distribution of power Pursuit of wealth E.g. absolute gains from economic interdependence and free trade 2) Economic cooperation (liberalism) impeded by fear of cheating E.g. Prisoner s Dilemma

18 United State s preference = DC>CC>DD>CD Canada s preference = CD>CC>DD>DC Realism: If both states are rational, fear of cheating and relative gains leads to: Equilibrium at (D,D) Key Point: Both states worse off then they could be... Not Pareto-Optimal

19 Neoliberal Institutionalists argue (C,C) is often equilibrium Why? 1) Iteration - repeated interaction increase likelihood of cooperation 2) Institutions reduce fear of cheating Surveillance & transparency Dispute resolution

20 a) Liberal Institutionalism: E.g. Robert Keohane = Neo-liberal institutionalism Attempted to subsume neo-realism - argued: 1) States motivated by: Anarchy and distribution of power Pursuit of wealth E.g. absolute gains from economic interdependence and free trade 2) Economic cooperation (liberalism) impeded by fear of cheating E.g. Prisoner s Dilemma : Category of game used to explain possibilities of cooperation.... International institutions can increase possibility of pareto optimal outcomes

21 b) Regime Theory : Key liberal response to HST explains endurance of international cooperation in absence of a hegemon Regime : Institutional relationships that deals with specific issue areas in international politics E.g. The trade regime Create regularity in actors behavior and expectations Made up of formal institutions, decision making procedures, rules, principles and norms....

22 3) Analytical Liberal Approaches: Other liberal theories are less institutional see IR in more pluralistic terms states are not unitary actors.... a) Interdependence Theory (Keohane and Nye) Increased economic integration alters calculations of states - creates costs for non-cooperation States not free to pursue unilateral policies because of complex web of relationships Interdependence can be hierarchical : Interdependence Asymmetric interdependence Dependence Suggests: Power politics not separate from economics.... Interdependence, once achieved, creates domestic pressure to keep cooperating Domestic politics matters.... Globalization changes nature of global politics

23 b) Republican Liberalism: Emphasis on domestic politics Domestic political institutions make cooperation more or less likely E.g. Democracy makes it harder for rent seeking elites to lead states into irrational policies Examples: Theory of Democratic Peace Democracies more likely to support free trade (Moresescik) By ignoring those different domestic institutional contexts, realists cannot explain why democracies get along better then non-democracies

24 c) Commercial Liberalism: Economic interdependence alters individual preferences, which via domestic politics changes state preferences State directly transmits the desires of citizens/firms Interdependence: Domestic Politics State Preferences: More international trade and investment -Advent of MNCs More domestic actors with international economic interests Support for free trade and global economic liberalism Issues are intermestic no clear distinction between domestic and international politics Suggests: Non-state actors likely to be important Economic Globalization supports Neoliberalism, not neorealism

25 Further Reading: Robert O. Keohane and Lisa L. Martin, The Promise of Institutionalist Theory, International Security, 20-1 (Summer 1995), pp Robert O. Keohane and Joseph S. Nye, Power and Interdependence, (Scott, Foresman, 2nd ed., 1989), chapter 1 (pp. 3-22) and chapter 2 (pp ). Either is a good example of two major varieties of liberal thinking....

26 4) Conclusions Strengths of Liberal Approaches: Incorporation of domestic politics... Levels of analysis division of international/domestic politics unrealistic Empirical... Can explain persistence of economic cooperation Globalization... Liberal approaches dealing directly with the meaning of globalization for modern IPE and domestic politics

27 4) Conclusions Problems? Too many considerations! Not parsimonious Lack of focus on distributional consequences of international politics Is liberalism idealistic in this regard? Perspective is very ideological Global capitalism and free markets are inherently good

28 For Next Time: Unit Four: Historical Materialism (a.k.a Marxism ) and IPE (October 6 & 8) Essay Proposal due in class, October 8!!!!!! Required Reading: Cohn, Ch. 5. Class Discussion Reading: Robert W. Cox, Civil Society at the Turn of the Millennium: Prospects for an Alternative World Order, Review of International Studies, 25 (1999), pp